Scenario 20.1 Use the following to answer the questions.
Suppose that Ray-Ban is considering a new line of sunglasses that would be sold in major department stores. The new line would be positioned as a more distinctive brand than the typical glasses sold through department stores, and would be priced higher than other brands in the store, but a lower price line than the current Ray-Ban lines that are sold through more selective stores. In determining the price for this sunglass line, Ray-Ban wants to gather information about all brands sold in department stores and about customers' perceptions of those brands.
Refer to Scenario 20.1. Ray-Ban has decided to promote the new sunglass line as an "affordable luxury" and plans significant promotional expenditures. With these objectives, which of the following should Ray-Ban use to price its product line?
A) Competition-based pricing
B) Cost-plus pricing
C) Markup pricing
D) Demand-based pricing
E) Differential pricing

Question

Quizplus · Accepted Answer

Since Ray-Ban wants to position the new sunglass line as an "affordable luxury", it is likely that the demand for the product will be driven by customers' perceptions of its unique and distinctive characteristics. Therefore, demand-based pricing would enable Ray-Ban to price the product based on the perceived value to the customer rather than relying on the cost or competition. In addition, significant promotional expenditures suggest that Ray-Ban is willing to create a premium image for the product, which could justify a higher price point through demand-based pricing.